Indian Economy

Model Answer

Role of Outcome Budgeting in Efficient Allocation of Resources in India

Outcome Budgeting (OB) is a strategic framework employed by the Indian government to link budgetary allocations to specific outputs and outcomes. It serves as a tool for improving the efficiency of resource allocation, ensuring that funds are used to achieve measurable goals. Here’s how Outcome Budgeting plays a pivotal role:

Better Conceptualization of Budgeting

Unlike traditional budgeting, which primarily focuses on financial outlays, Outcome Budgeting emphasizes the desired outcomes from the expenditure. This method requires ministries and departments to plan their budget with a clear focus on achieving specific, measurable results. For instance, by setting clear targets for development schemes, the government ensures that each rupee spent contributes to the expected socio-economic objectives, such as poverty alleviation or infrastructure development.

Defined Outputs and Outcomes

Outcome Budgeting requires clear identification of outputs (the goods or services produced) and outcomes (the impact or benefit derived from these goods or services). This transparency helps ministries plan better and allocate resources more effectively to areas with higher potential for impact. For example, the Pradhan Mantri Fasal Bima Yojana has defined targets like timely claim settlements, which ensures that resources are directed to programs that deliver measurable results.

Cost Reduction and Improved Efficiency

One of the most important aspects of Outcome Budgeting is its ability to identify inefficient expenditure. Schemes that fail to meet their objectives can be reassessed or discontinued, redirecting funds to more effective programs. This helps reduce waste and ensures that taxpayers’ money is spent where it can have the greatest impact.

Supporting Socio-Economic Goals

Outcome Budgeting supports the government’s socio-economic objectives by promoting transparency, accountability, and citizen participation. For example, programs like PM KISAN aim to provide income support to farmers, directly contributing to financial inclusion and rural development. This system also allows for regular evaluations, ensuring that schemes are continuously improved to meet their intended outcomes.

In conclusion, Outcome Budgeting is integral to ensuring that public resources in India are allocated efficiently, with a focus on achieving tangible, positive socio-economic outcomes. By enhancing transparency, targeting priority areas, and fostering accountability, it supports the overarching goal of effective governance.

Model Answer

1. Better Standard of Living: Many HNIs seek better educational and healthcare facilities, work-life balance, and improved quality of life abroad. Countries with advanced infrastructure and opportunities for citizenship are attractive to them.
2. Tax Havens: Countries like Singapore and the UAE are favored by HNIs due to their favorable tax regimes, including low corporate tax rates, zero wealth, and inheritance taxes, which help preserve and grow their wealth.
3. Golden Visa Programmes: Some countries offer residency through investment schemes (such as Portugal and the UAE), where HNIs can invest in exchange for residence and sometimes citizenship, providing an opportunity for investment diversification.
4. Tax Laws in India: Stringent and complex tax laws, particularly the increase in Tax Collection at also contribute to the migration trend, as HNIs seek tax-friendly environments abroad.
5. Other Factors: Issues like political instability, pollution, personal freedoms, and security concerns also motivate HNIs to migrate to countries offering a better living environment.

Economic Implications of HNI Migration

1. Loss of Tax Revenue: HNIs contribute significantly to the tax revenue of India, both directly through income taxes and indirectly through consumption taxes. Their departure leads to a reduction in government revenue.
2. Loss of Investment and Employment: HNIs are not just taxpayers but also entrepreneurs, investors, and employers. Their migration results in the loss of potential investments, businesses, and job creation opportunities in India.
3. Loss of Reputation and Confidence: The outmigration of HNIs could signal to the global community that India’s business environment, governance, and living standards are not conducive to retaining wealth, potentially deterring future investments and talent.

Conclusion

The trend of HNIs migrating abroad poses challenges for India’s economy, particularly in terms of tax revenue, investment, and international reputation. To curb this migration, India needs to focus on improving the standard of living, implementing tax reforms, and creating a more attractive business environment to retain its wealthy citizens.